The Hidden Costs and Benefits of Free-After-Rebate Offers

Are free-after-rebate offers really free? Sometimes. In fact, sometimes you – the consumer – can actually make a little money on the deal.

“What Does That Free Item Really Cost Me?

Free-after-rebate refunds generally come in two forms: check or store credit in the amount of the purchase price. When the refund comes in form of a check, the costs to you are relatively small – you will generally have to pay the tax (if the item is taxable), travel expenses (gas), and sometimes postage. You also lose the use of your money for the time it takes for the rebate to process.

For larger rebates, you should also spend a few cents to make a copy of all the materials you send the company so that you have proof that you’ve followed their requirements if the rebate doesn’t arrive when it should. Incidentally, be sure to read all the fine print on a rebate form and follow it to the letter – some companies will reject rebate submissions over minor details. (I once had one rejected because the receipt didn’t indicate what size package I had bought; when I called the company, they took my word that it was the right size and sent me the rebate.)

The second form of rebate in a “free” offer, store credit, isn’t really free at all. Rather than getting the original product free, you are getting a discount on a future purchase. It’s great if you need something else from the same store, but if not, you are actually paying some additional opportunity costs — specifically, the opportunity to buy something else. A rebate check can be put toward a car repair or a tuition bill; store credit at CVS can’t.

Store credit rebates are not a complete waste of time, however. If you shop at a store that regularly makes these offers, you can create a chain of rebates for the price of first and/or most expensive products you buy. Simply use the store credit to purchase future free-after-rebate items, and the later/less expensive rebate items will truly be free, as you don’t lose any cash or store credit when you buy it. Some stores, such as Walgreens, offer incentives for choosing store credit over cash for rebates. In the case of Walgreens, rebate shoppers receive a 10% bonus for choosing store credit; as with similar offers, that credit can be used to purchase future rebate items.

In both types of rebates, you might be able to make money by combining coupons with the rebates. Individual stores and manufacturers handle coupons differently, but most will not deduct a coupon from the price of the item when they write out the rebate check. So, for example, you can buy a $2.99 tube of toothpaste advertised as free after rebate, use a $1.00 coupon, and still get $2.99 back, thereby making a dollar (minus tax and any incidental expenses). Use the $2.99 to buy a free-after-rebate toothbrush for the same price, and you will eventually have a toothbrush, toothpaste, and nearly $2.99 to spend on something else.

“What’s In It for Them?

Why do stores give things away? They want consumers to come into the store, pick up the loss leaders (sale items the store has priced so low that it loses money), and spend money on more things that aren’t on sale. Drug stores, office supply stores, and grocery stores are the ones that most frequently offer free-after-rebate specials and similar sales. These stores may lose money on individual products and on customers who stick to the specials, but they make money overall on the sales, so the strategy must work.

In addition to stores, manufacturers sometimes offer products free after rebate. The rebate forms might appear in the Sunday coupon insert, at a store’s customer service desk, or on the product itself. These free-after-rebate (or “try me free”) offers have a different purpose – to help you overcome your reluctance to try a new product. Manufacturers hope you will like that particular product and will continue to buy it. They offer rebates instead of free coupons because they hope you will forget to fill out the form and send it in.

“But I Hate Rebates!

Some people hate rebates. When I confess to my rebating activities, these people usually say one of two things to me: “I never get the rebates back!” or “Do you really use all that stuff you get?” (I find it interesting that the first is usually an “I” statement and the second is usually a “you” statement, accusing me of greed because I like freebies.)

To the first objection, I reply that I have had very few problems with not receiving rebates. I keep a calendar of when I requested various rebates. If more time passes than the time allotted in the fine print of the rebate, I call the company to ask about it. Usually they’ll correct the problem and send it right out. I have rarely had to call, and only once did a call fail to correct the problem. (In that case, I had not kept copies of the rebate materials because I had submitted them online and had relied on the store’s computers to keep track of my purchases.)

The short answer to the second objection – “Do you really use it all?” – is, “No, I don’t.” However, that doesn’t mean the things I buy on rebate go to waste. If I don’t need something right away but will use it in the future, I store it. I have a closet full of toothbrushes, toothpaste, shampoo, and razors that I have gotten free; our family almost never spends money on personal care items. If I get too many things, I can sell them at a yard sale or donate them to a women’s shelter, pregnancy care center, or other nonprofit organization. Even if I have no use for a particular rebate item, I sometimes consider buying it for resale. Several years ago, I got some Crayola items free after rebate and immediately sold them on eBay for close to their retail price.

Although free-after-rebate offers have some hidden costs, they are usually worth the time and effort. By buying things you will eventually need when they are on rebate, you can save a lot of money, and occasionally you may find a store will pay you to take a product off its shelves!

4 Responses to The Hidden Costs and Benefits of Free-After-Rebate Offers

I too have only experienced a few problems with rebates, however, those problems have been quite costly. A $50 rebate I never received, another for $20… it has soured me to using rebates, in general. I certainly would never make a purchase decision based on the price after rebate. If something I want to buy also has a rebate, then fine. But if two items are otherwise equal, and one is $79 and the other is $99 with a $30 rebate, I will buy the $79 item.

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Great post! Thanks for the tip about using coupons with rebates. I didn’t know about that.

I think some people have success buying free (or very cheap) after rebate items from Buy.com and then reselling them on Amazon, but I’ve found that supply and demand lowers the price of these items on Amazon and I can’t make a profit. You may have more luck with this method if you find less publicized free after rebate items (buy.com sends out alert emails).